Understanding ICT Inversion Fair Value Gaps (IFVG) In Trading
Introduction
The ICT Inversion Fair Value Gap (IFVG) is a powerful concept in the world of Smart Money trading, specifically taught by Inner Circle Trader (ICT), a widely respected figure in institutional trading education. Understanding and applying the IFVG can provide traders with a strategic edge by allowing them to identify high-probability entry points aligned with institutional order flow.
This article will break down what the ICT IFVG is, how it differs from a regular Fair Value Gap (FVG), and how you can implement it effectively into your trading strategy.
What Is a Fair Value Gap (FVG)?
A Fair Value Gap (FVG) is a price imbalance that occurs on a candlestick chart when there's a three-candle formation where the middle candle’s body does not overlap the wicks of the first and third candles. It represents an area where price moved too quickly, leaving unfilled orders, often caused by institutional buying or selling.
Example of a Bullish FVG:
- Candle 1: Bullish (up candle)
- Candle 2: Strong Bullish candle with a large body and small/no wicks
- Candle 3: Bearish (down candle)
The gap between the high of Candle 1 and the low of Candle 3 forms the FVG.
What Makes the Inversion FVG Special?
While a standard FVG acts as a magnet for price retracements, the Inversion Fair Value Gap (IFVG) is where the market reacts and reverses from a previously respected FVG zone — typically due to a shift in liquidity or market structure.
IFVG Definition:
An ICT Inversion Fair Value Gap is a previous FVG that price traded through, but upon return, it acts as support/resistance, not just a filler. It's "inverted" because its role has flipped — from a gap to a liquidity-based reversal zone.
Why Does It Matter?
- Shows institutional interest
- Acts as a high-probability reversal zone
- Enhances trade precision and timing
Types of ICT Inversion Fair Value Gaps (IFVGs)
Understanding the types of IFVGs is essential for applying them correctly in different market conditions. Each type reflects how institutional players may be repositioning their orders or shifting liquidity zones.
Here are the most common and actionable types of IFVGs:
1. Bullish IFVG
- Occurs After: Price breaks below a bullish FVG, then returns and respects it as support.
- Significance: Signals that price may resume upward momentum after a temporary sell-off.
- Best Used When: Aligned with higher-timeframe bullish structure and after a liquidity sweep below key lows.
Example Setup:
- Price trades through the FVG
- Forms a higher low (HL)
- Re-enters and respects the lower boundary of the FVG → Go long
2. Bearish IFVG
- Occurs After: Price breaks above a bearish FVG, then returns and respects it as resistance.
- Significance: Indicates possible continuation to the downside, suggesting institutions sold into the rally.
- Best Used When: Market structure flips from bullish to bearish, often after a Judas swing or liquidity raid above equal highs.
Example Setup:
- Price trades up through bearish FVG
- Forms lower high (LH)
- Retests the FVG zone → Go short
Key Characteristics of ICT IFVG
- Price traded through the original FVG
- Market structure shift or liquidity sweep follows
- Upon retest, the FVG area acts as support (in bullish IFVG) or resistance (in bearish IFVG)
- Often aligns with order blocks, liquidity pools, or Judas swings
How to Identify and Trade the ICT IFVG
Step-by-Step Strategy:
- Mark Fair Value Gaps: Identify bullish or bearish FVGs using a 3-candle pattern on a 15m, 1H, or 4H chart.
- Watch for Break and Close Through the FVG: Wait for a full-bodied candle to break through the FVG with conviction.
- Confirm Shift in Market Structure: Look for a change in structure (e.g., HH → LL for bearish reversal).
- Retest the FVG (Now IFVG): Price pulls back into the original FVG zone. This is your potential entry point.
- Entry and Stop Loss:
-
- Entry: Near the midpoint of the IFVG zone
- Stop Loss: Just beyond the opposite side of the gap
- Target: Next liquidity pool (swing high/low or unfilled FVG)
Example of IFVG in Action (Bullish)
- Price rallies, leaving an FVG
- Price breaks below the FVG later, forming a bearish shift
- Upon retracing, the bottom of the FVG acts as resistance
- Enter short at the retest with target at the next low
Tips for Success with IFVG Trading
- Combine IFVGs with liquidity zones, order blocks, and time-of-day filters (e.g., NY Open)
- Always wait for confirmation — don’t blindly enter at the gap
- Use volume and displacement to gauge institutional intent
- Practice in demo accounts before going live
Common Mistakes to Avoid
- Trading FVGs without understanding context
- Ignoring higher time frame market structure
- Setting stops too tight within volatile ranges
- Not using liquidity concepts alongside IFVG
Conclusion
If you're diving into Smart Money Concepts (SMC) or ICT methodology, the Inversion Fair Value Gap is a must-know tool in your arsenal. It combines institutional logic, liquidity theory, and market psychology into one high-precision trade model.
Mastering IFVGs means:
- Cleaner entries
- Tighter stops
- Higher reward-to-risk trades